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2021 (5) TMI 438 - AT - Income TaxCondonation of delay in filing in appeal - non-filing of appeal due to error in the order - Rectification under section 154 - addition made by assessing officer under section 68 on account of unexplained share application money, which was not adjudicated by the ld.CIT(A) - HELD THAT - We note that Assessing Officer has discussed the addition under section 68 in his assessment order and made addition under section 68. However, the Assessing Officer did not bring this said addition in the computation of total income and consequently did not create the demand. However, later on the Assessing Officer has rectified his assessment order under section 154. We note that order under section 154 of the Act is appealable order, however, the assessee did not file the appeal before the ld CIT(A) against the rectification order under section 154 of the Act. The assessee filed the appeal before the ld CIT(A) against the order passed by the assessing officer under section 143(3) CIT(A) has rightly pointed out that order passed under section 154 of the Act is a separate order for which assessee need to file appeal separately , but the assessee has failed to do so. The ld CIT(A) has also stated that assessee deserves full sympathetic consideration with regard to condonation of delay in filing appeal against order passed u/s 154 of the Act. . Taking into account the factual position narrated above and to meet the end of justice, we remit this issue back to the file of the Ld. CIT(A) for de novo adjudication. We direct the assessee to file an appeal before the Ld. CIT(A) against the order under section 154 dated 09.04.2014 within one month from the date of receipt of this order. Since, in this case there was mistake on the part of the Assessing Officer, as he did not bring the addition made by him in the computation of taxes and did not create the demand, and that is why, assessee s issue has not been adjudicated. The assessee should not suffer because of the mistake made by the Assessing Officer. Hence, assessee deserves that delay in filing appeal against the order under section 154 should be condoned. Therefore, we direct the Ld. CIT(A) to condone the entire delay in filing the appeal against the order under section 154 of the Act dated 09.04.2014 and adjudicate the appeal of the assessee on merits. Disallowance being 10% of various expenses - Non rejection of books of accounts - HELD THAT - there is no material on record to show that any part of these expenses was incurred for non-business purposes. We note that assessee s books of accounts are audited by Chartered Accountant. The reports of the auditors could be said to be material on which reliance could be placed by the Income Tax authorities. The Income Tax authorities not only to accept the auditors' report, but also to draw the proper inference from the same. Here in assessee s case, the AO has not passed any order u/s 144 of the Act. The AO thus without rejecting the books of account of the assessee has gone for estimation on suspicion and conjectures that the assessee may be inflating its expenses. It may be pertinent to mention here that there was no material on record to show that any part of these expenditures were not for the purpose of business. Therefore, we delete the ad hoc addition Set off of unabsorbed depreciation loss and carried forward business loss of previous years from the assessed income of the assessee - HELD THAT - Based on the material before us assessee is entitled to claim set-off of unabsorbed depreciation and carry forward of business loss.Therefore, we direct the assessing officer to examine the return of income of the assessee and the charts, and after due verification, allow the claim of assessee in accordance with law. Therefore, statistical purposes the ground Nos. 3 and 4 are treated to be allowed.
Issues Involved:
1. Addition of ?12,10,00,000/- under section 68 for unexplained share application money. 2. Ad hoc disallowance of ?80,97,725/- being 10% of various expenses. 3. Setoff of unabsorbed depreciation loss and carried forward business loss of previous years. 4. Setoff of current year business loss from the assessed income. Issue-wise Detailed Analysis: 1. Addition of ?12,10,00,000/- under section 68 for unexplained share application money: The assessee raised the issue of addition under section 68 for unexplained share application money amounting to ?12,10,00,000/-, which was not adjudicated by the CIT(A). The Assessing Officer (AO) initially did not include this addition in the computation of total income, leading to no demand creation. This mistake was later rectified under section 154. The CIT(A) advised the assessee to appeal against the order under section 154, which the assessee failed to do. The Tribunal noted that the AO's omission was a clerical mistake and directed the CIT(A) to condone the delay in filing the appeal against the rectification order and adjudicate the issue on merits. 2. Ad hoc disallowance of ?80,97,725/- being 10% of various expenses: The AO disallowed 10% of various expenses totaling ?8,09,77,259/-, amounting to ?80,97,725/-, on the grounds that the assessee failed to prove these expenses were incurred wholly and exclusively for business purposes. The CIT(A) upheld this disallowance. However, the Tribunal found that the AO made an arbitrary ad hoc disallowance without rejecting the books of accounts under section 145(3) and without any material evidence showing non-business purposes for the expenses. Citing the Delhi High Court judgment in National Industrial Corp. Ltd, the Tribunal deleted the ad hoc disallowance, emphasizing that the AO should have disallowed specific unsupported expenses rather than making a percentage-based disallowance. 3. Setoff of unabsorbed depreciation loss and carried forward business loss of previous years: The assessee claimed setoff of unabsorbed depreciation and carried forward business losses from previous years. The Tribunal noted that this issue is consequential and directed the AO to verify the assessee's claims based on the return of income and supporting documents. The AO was instructed to allow the setoff in accordance with the law after due verification. 4. Setoff of current year business loss from the assessed income: Similar to the previous issue, the Tribunal directed the AO to verify and allow the setoff of the current year's business loss from the assessed income, provided the claim is substantiated by proper documentation. Conclusion: The Tribunal allowed the appeal partly for statistical purposes. The AO was directed to verify and allow the setoff of unabsorbed depreciation and business losses after due verification. The ad hoc disallowance of ?80,97,725/- was deleted, and the issue of addition under section 68 was remitted back to the CIT(A) for fresh adjudication after condoning the delay in filing the appeal against the rectification order. The order was pronounced on 11/05/2021.
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